[This is posted in the new Category Economics, Technical]
[Published 14 March at Real World Economics Review Blog. Also posted 12 March at Steve Keen’s Debtwatch]
Many people, including many heterodox economists, understand that the neoclassical equilibrium approach to understanding economies is futile and misleading , because modern economies are far from equilibrium. The neoclassical prediction of equilibrium or near equilibrium requires a string of patently absurd assumptions. However the development of better theories seems to be significantly hindered by a feeling that any superseding theory has to be thoroughly quantified before it can be useful, and a feeling that the neoclassical theory has set a benchmark for sophisticated mathematics that must be matched before another theory can be respectable. Less fundamentally there seems to be a common perception that empirical insights can only be gained through elaborate statistical treatments of observations.
Here I offer some discussion from my experience as a natural scientist, and some examples regarding the Global Financial Crisis, to counter these hindrances. Continue reading
[This post is addressed to fringe economists and others who have broken with ever-more dysfunctional mainstream neoclassical economics, but who still search for a replacement paradigm.]
[2 Aug: Posted on Real-World Economics Review Blog.]
The need for a new conception of economics is widely acknowledged in the wake of the global financial crisis, at least outside of diehard neoclassical circles. However a common perception seems to be that no adequate and coherent general conception is in sight, though many loosely related or unrelated heterodoxies vie for attention, as noted by the Editor of Real World Economic Review blog. I argue here that when the subject is approached from the point of view of dynamical systems a broad new framework becomes evident. Furthermore, once the nature of the beast is identified, some fundamental conclusions can immediately be drawn.
Extracts from Economia.
The writing of Economia was essentially completed in 2003. It was obvious then that the global financial system must come to crisis within a few years.
The Global Financial Crisis, serious as it is, is only part of a deeper crisis reaching to the core of how modern economies are conceived and managed. The problem is not just that financial markets have acquired excessive power and are greedy, corrupt, unstable and destructive. It is not even that the GFC has not yet shown us its worst, as Steven Keen argues (Declaring victory at half time). It is that mainstream economists have fundamentally mis-identified the nature of the beast they are dealing with.